February 22, 2013

All that is Goldman Sachs does not glitter.

Benros Capital, a hedge fund started by two former traders from Goldman Sachs, will shut down after less than two years of trading. The fund’s main investor Brummer & Partners of Sweden pulled their investment after deciding that the fund "has not lived up to expectations," according to press reports.

That’s an understatement. According to Bloomberg:

Benros declined 5.6 percent last year, according to a performance report obtained by Bloomberg. It dropped another 1.4 percent through the first six weeks of this year, bringing its decline to 7 percent since inception, Brummer's website said.

The average event-driven fund climbed 8.9 percent in 2012, according to data from Chicago-based Hedge Fund Research Inc.

[Q&A: The State of the Hedge Fund Industry in 2013]

Benros, which managed a modest $315 million as of January 31st, was founded by Daniele Benatoff, 33, Ariel Roskis, 37, and three other traders of the Goldman Sachs proprietary trading desk.

This isn’t the first hedge fund run by former Goldman Sachs Wunderkinds to crash and burn. Last November Edoma, a hedge fund with yet another ex-Goldman Sachs prop trader at the helm shut down due to lackluster performance. As FierceFinance reports, "some may be wondering about the fate Azentus Capital, which was set up by former Goldman Sachs prop trader Morgan Sze. The fund managed $2 billion at one point. According to Reuters, the fund fell 6.8 percent in in 2011 and gained only about 1 percent in 2012."

Hindsight is 20-20

Remember back in 2008 when the banks were on the verge of collapse, took their federal bailouts and continued to pay their traders and senior executives whopping bonuses? The investment firm and bank CEOs all claimed that if they didn't reward their traders - the best and the brightest of Wall Street and the City - they'd all leave and start their own hedge funds.

If only someone like Tim Geithner, Ben Bernanke or Hank Paulson - the architects of the government’s TARP bailouts - could have called their bluff. "Go ahead, be my guest."

[Here's an idea: Revamping the Street's Bonus Structure.]

ABOUT THE AUTHOR
Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining ...